Impact investment goes mainstream.
At the New York Times Wealth Matters blog, a personal finance advice column for the wealthy, Paul Sullivan discusses the significance of impact investing, which he succinctly defines as a “private equity fund for social change.” It is unlike socially responsible investing, which merely excludes investing in areas considered distasteful by the investor, in that it actively aims to bring about social change.
It is unlike Kiva’s microlending model in that minimum investments hover around $1 million and attract investors with a net worth of $10 million or more. Furthermore, investors agree to sell the investments after a specific amount of time. Sullivan then defends his analogy comparing private equity and philanthropy—which he acknowledges is oxymoronic—by noting that like private equity, impact investing targets returns close to 20 percent a year, and, like private equity, investments are illiquid and thus come with a considerable degree of risk.
Some interviewed for the article claim that “the tipping point [for impact investing] is now.” (Currently, impact investments amount to about $50 billion, and are projected to grow tenfold to $500 billion by 2014.)
However, others are concerned about the consequences of it being a nascent sphere—e.g., lack of awareness and standards, which the Global Impact Investing Network aims to remedy. (Even at $500 billion, impact investments would only comprise 1 percent of all managed assets.)
Although the Matthew 19:24 proclaims that “it is easier for a camel to go through the eye of a needle than for a rich man to enter the Kingdom of God,” this may no longer hold true in the face of impact investing.